JANUARY 2023

VOlUME 06 ISSUE 01 JANUARY 2023
The Effect of Corporate Social Responsibility on The Persistence of Financial Performance
1 Akhmad Riduwan ,2 Andajani
1,2 Sekolah Tinggi Ilmu Ekonomi Indonesia (STIESIA) Surabaya, Surabaya, Indonesia
DOI : https://doi.org/10.47191/ijsshr/v6-i1-73

Google Scholar Download Pdf
ABSTRACT

The company's financial performance, especially reported earnings, is not an independent variable to influence investors' decisions. A number of studies have shown evidence that investors' responses to financial performance are greater when companies have high concern for social and environmental problems. This study aims to obtain evidence that the fulfillment of economic-socio-ecological responsibilities is a determinant that can drives financial performance sustainability. This study took a sample of 69 public companies in Indonesia with an observation period of 10 years. Multiple univariate regression model was applied to test the research hypothesis. The results of the study indicate that the fulfillment of economic-socio-ecological responsibilities triggers the sustainability of the company's financial performance. The results of this study have implications for business practices. First, it is important for companies to fulfill their economic-socio-ecological responsibilities to gain legitimacy and stakeholder support. Second, the fulfillment of economic-socio-ecological responsibilities is important to be disclosed to the public so that stakeholders can assess the risks and prospects of the company based on social and environmental factors. Fulfillment of economic-socio-ecological responsibilities is important to disclosed to the public to assess the risks and prospects of the company based on social and environmental factors.

KEYWORDS:

economic responsibility, social responsibility, ecological responsibility, financial performance sustainability

REFERENCES

1) A. Riduwan and A. Andajani, “Sustainability Concerns and Investor Responses to Earnings Announcements,” Indones. J. Sustain. Account. Manag., vol. 3, no. 2, p. 187, 2019.

2) D. Hapsoro and Z. F. Husain, “Does sustainability report moderate the effect of financial performance on investor reaction? Evidence of Indonesian listed firms,” Int. J. Bus., vol. 24, no. 3, pp. 308–328, 2019.

3) Y. C. Kim, I. Seol, and Y. S. Kang, “A study on the earnings response coefficient (ERC) of socially responsible firms: Legal environment and stages of corporate social responsibility,” Manag. Res. Rev., vol. 41, no. 9, pp. 1010–1032, 2018.

4) Z. Al Mubarak, A. Ben Hamed, and M. Al Mubarak, “Impact of corporate social responsibility on bank’s corporate image,” Soc. Responsib. J., vol. 15, no. 5, pp. 710–722, 2019.

5) C. H. Cho, M. Freedman, and D. M. Patten, “Corporate disclosure of environmental capital expenditures: A test of alternative theories,” Accounting, Audit. Account. J., vol. 25, no. 3, pp. 486–507, 2012.

6) A. K. Hinze and F. Sump, “Corporate social responsibility and financial analysts: a review of the literature,” Sustain. Accounting, Manag. Policy J., vol. 10, no. 1, pp. 183–207, 2019.

7) A. Hamrouni, A. Uyar, and R. Boussaada, “Are corporate social responsibility disclosures relevant for lenders? Empirical evidence from France,” Manag. Decis., vol. 58, no. 2, pp. 267–279, 2020.

8) [ A. Axjonow, J. Ernstberger, and C. Pott, “The Impact of Corporate Social Responsibility Disclosure on Corporate Reputation: A Non-professional Stakeholder Perspective,” J. Bus. Ethics, vol. 151, no. 2, pp. 429–450, 2018.

9) H. Brown-Liburd, J. Cohen, and V. L. Zamora, “CSR Disclosure Items Used as Fairness Heuristics in the Investment Decision,” J. Bus. Ethics, vol. 152, no. 1, pp. 275–289, 2018.

10) F. H. M. Verbeeten, R. Gamerschlag, and K. Möller, “Are CSR disclosures relevant for investors? Empirical evidence from Germany,” Manag. Decis., vol. 54, no. 6, pp. 1359–1382, 2016.

11) E. Platonova, M. Asutay, R. Dixon, and S. Mohammad, “The Impact of Corporate Social Responsibility Disclosure on Financial Performance: Evidence from the GCC Islamic Banking Sector,” J. Bus. Ethics, vol. 151, no. 2, pp. 451–471, 2018.

12) D. & A. S. Razafindrambinina, “The Impact of Strategic Corporate Social Responsibility on Operating Performance: An Investigation Using Data Envelopment Analysis in Indonesia Annisa Sabran - Marketing Management , Prasetiya Mulya Business School ,” J. Bus. Stud. Q., vol. 6, no. 1, pp. 1–12, 2014.

13) Y. C. Lin, “Does r&D investment under corporate social responsibility increase firm performance?,” Invest. Manag. Financ. Innov., vol. 14, no. 1, pp. 217–226, 2017.

14) D. M. Mathuva and J. M. Kiweu, “Cooperative social and environmental disclosure and financial performance of savings and credit cooperatives in Kenya,” Adv. Account., vol. 35, pp. 197–206, 2016.

15) I. R. Widyatini, “Financial Inclusion for Economic Sustainability through the Implementation of Good Corporate Governance,” Rev. Integr. Bus. Econ. Res., vol. 8, no. 3, pp. 122–130, 2019.

16) A. Schneider, “Reflexivity in Sustainability Accounting and Management: Transcending the Economic Focus of Corporate Sustainability,” J. Bus. Ethics, vol. 127, no. 3, pp. 525–536, 2015.

17) Y. Yanti, “The Effects of Operating Cash Flow, Sales Volatility, and Leverage on Earnings’ Persistence,” Int. J. Econ. Perspect., vol. 11, no. 1, pp. 1535–1544, 2017.

18) A. C. Kolozsvari and M. A. Da Silva Macedo, “Analysis of the influence of income smoothing over earnings persistence in the Brazilian market,” Rev. Contab. e Financ., vol. 27, no. 72, pp. 306–319, 2016.

19) L. Canina and G. Potter, “Determinants of Earnings Persistence and Predictability for Lodging Properties,” Cornell Hosp. Q., vol. 60, no. 1, pp. 40–51, 2019.

20) C. M. Hsiao, L. Pin-Reuy, S. Li-Yun, and T. Yun-Jean, “The location advantages and persistence of the performance for the Taiwan logistic company: A case study,” Cogent Bus. Manag., vol. 5, no. 1, pp. 1–18, 2018.

21) Z. Rezaee, H. Dou, and H. Zhang, “Corporate social responsibility and earnings quality: Evidence from China,” Glob. Financ. J., vol. 45, no. April, p. 100473, 2020.

22) S. Vatankhah, A. Raoofi, and M. Ghobadnezhad, “Using compensation satisfaction to predict turnover intention and theft among cabin crew: Mediating role of fraternal deprivation,” J. Serv. Sci. Res., vol. 9, no. 1, pp. 91–119, 2017.

23) A. Issa and A. Alleyne, “Corporate disclosure on anti-corruption practice: A study of social responsible companies in the Gulf Cooperation Council,” J. Financ. Crime, vol. 25, no. 4, pp. 1077–1093, 2018.

24) S. Kanapathippillai, D. Mihret, and S. Johl, “Remuneration Committees and Attribution Disclosures on Remuneration Decisions: Australian Evidence,” J. Bus. Ethics, vol. 158, no. 4, pp. 1063–1082, 2019.

25) Z. Zhang, R. Chatelain-jardon, and J. L. Daniel, “The Effects Of Scandal On Corporate Image And Purchase Intention: Perspectives From Consumers,” Acad. Mark. Stud. J., vol. 23, no. 2, pp. 1–12, 2019.

26) M. Etter, C. Fieseler, and G. Whelan, “Sharing Economy, Sharing Responsibility? Corporate Social Responsibility in the Digital Age,” J. Bus. Ethics, vol. 159, no. 4, pp. 935–942, 2019.

27) A. genedy & A. Sakr, “The relationship between corporate social responsibility and corporate financial performance in Korea,” Int. J. Bus. Econ. Dev., vol. 5, no. 2, pp. 59–73, 2017.

28) M. Nizamuddin, “Corporate Social Responsibility and Corporate Financial Performance: An Exploratory Study of Measurement-Approach Selection Issues,” IUP J. Corp. Gov., vol. XVII, no. 2, pp. 36–55, 2018.

29) A. K. Sekhon and L. M. Kathuria, “Analyzing the impact of corporate social responsibility on corporate financial performance: evidence from top Indian firms,” Corp. Gov., vol. 20, no. 1, pp. 143–157, 2020.

30) R. Huang and D. Chen, “Does Environmental Information Disclosure Benefit Waste Discharge Reduction? Evidence from China,” J. Bus. Ethics, vol. 129, no. 3, pp. 535–552, 2015.

31) K. Palmer and M. Walls, “Using information to close the energy efficiency gap: a review of benchmarking and disclosure ordinances,” Energy Effic., vol. 10, no. 3, pp. 673–691, 2017.

32) Y. Lu and I. Abeysekera, “What Do Stakeholders Care About? Investigating Corporate Social and Environmental Disclosure in China,” J. Bus. Ethics, vol. 144, no. 1, pp. 169–184, 2017.

33) W. Dilla, D. Janvrin, J. Perkins, and R. Raschke, “Do environmental responsibility views influence investors’ use of environmental performance and assurance information?,” Sustain. Accounting, Manag. Policy J., vol. 10, no. 3, pp.476–497, 2019.

34) Nurdiawansyah, Lindrianasari, and A. Komalasari, “Carbon Emission Issues in Indonesia,” Rev. Integr. Bus. Econ. Res., vol. 7, no. 3, pp. 20–33, 2018.

35) N. K. Hidayat, A. Offermans, and P. Glasbergen, “Sustainable palm oil as a public responsibility? On the governance capacity of Indonesian Standard for Sustainable Palm Oil (ISPO),” Agric. Human Values, vol. 35, no. 1, pp. 223–242, 2018.

36) I. Murdifin, M. F. A. Pelu, A. H. P. K. Putra, A. M. Arumbarkah, Muslim, and A. Rahmah, “Environmental disclosure as corporate social responsibility: Evidence from the biggest nickel mining in Indonesia,” Int. J. Energy Econ. Policy, vol. 9, no. 1, pp. 115–122, 2019.

37) E. Setiany, D. Suhardjanto, Purwanto, and D. Ashardianti, “Environmental Disclosure in Agricultural Sector and Consumer Goods Annual Report ( Comparison between Indonesia and Malaysia ),” Rev. Integr. Bus. Econ. Res., vol. 7, no. 4, pp. 203–215, 2018.

38) R. B. Deswanto and S. V. Siregar, “The associations between environmental disclosures with financial performance, environmental performance, and firm value,” Soc. Responsib. J., vol. 14, no. 1, pp. 180–193, 2018.

39) J. Xie, W. Nozawa, M. Yagi, H. Fujii, and S. Managi, “Do environmental, social, and governance activities improve corporate financial performance?,” Bus. Strateg. Environ., vol. 28, no. 2, pp. 286–300, 2019.

40) F. Shen, Y. Ma, R. Wang, N. Pan, and Z. Meng, “Does environmental performance affect financial performance? Evidence from Chinese listed companies in heavily polluting industries,” Qual. Quant., vol. 53, no. 4, pp. 1941–1958, 2019.

41) N. Saini and M. Singhania, “Performance relevance of environmental and social disclosures: The role of foreign ownership,” Benchmarking, vol. 26, no. 6, pp. 1845–1873, 2019.

42) T. Adomah Worae and C. C. Ngwakwe, “Environmental responsibility and financial performance nexus in South Africa: panel Granger causality analysis,” Environ. Econ., vol. 8, no. 3, pp. 29–34, 2017.

43) J. Tarigan, S. E. Hatane, L. Stacia, and D. C. Widjaja, “Corporate social responsibility policies and value creation: Does corporate governance and profitability mediate that relationship?,” Invest. Manag. Financ. Innov., vol. 16, no.2, pp. 270–280, 2019.

44) A. Kumaza and Y. He, “Is Corporate Governance Accountability Branch of Social Responsibility? An Empirical Intuition from Ghana,” Financ. Manag. Strateg., vol. 13, no. 2, pp. 67–96, 2018.

45) J. M. Sahut, M. Peris-Ortiz, and F. Teulon, “Corporate social responsibility and governance,” J. Manag. Gov., vol. 23, no. 4, pp. 901–912, 2019.

46) E. Fontana and N. Egels-Zandén, “Non Sibi, Sed Omnibus: Influence of Supplier Collective Behaviour on Corporate Social Responsibility in the Bangladeshi Apparel Supply Chain,” J. Bus. Ethics, vol. 159, no. 4, pp. 1047–1064, 2019.

47) Y. N. Cho, “Different Shades of Green Consciousness: The Interplay of Sustainability Labeling and Environmental Impact on Product Evaluations,” J. Bus. Ethics, vol. 128, no. 1, pp. 73–82, 2015.

48) J. Ha-Brookshire, “Toward Moral Responsibility Theories of Corporate Sustainability and Sustainable Supply Chain,” J. Bus. Ethics, vol. 145, no. 2, pp. 227–237, 2017.

49) D. Eriksson and G. Svensson, “Managers’ psychological challenges in implementing corporate responsibility in supply chains,” Corp. Gov., vol. 18, no. 3, pp. 564–578, 2018.

50) C. K. Hoi, Q. Wu, and H. Zhang, “Community Social Capital and Corporate Social Responsibility,” J. Bus. Ethics, vol. 152, no. 3, pp. 647–665, 2018.

51) B. Wisse, R. van Eijbergen, E. F. Rietzschel, and S. Scheibe, “Catering to the Needs of an Aging Workforce: The Role of Employee Age in the Relationship Between Corporate Social Responsibility and Employee Satisfaction,” J. Bus. Ethics, vol. 147, no. 4, pp. 875–888, 2018.

52) J. Cohen, L. Holder-Webb, and S. Khalil, “A Further Examination of the Impact of Corporate Social Responsibility and Governance on Investment Decisions,” J. Bus. Ethics, vol. 146, no. 1, pp. 203–218, 2017.

53) S. Y. Cho and C. Lee, “Managerial Efficiency, Corporate Social Performance, and Corporate Financial Performance,” J. Bus. Ethics, vol. 158, no. 2, pp. 467–486, 2019.

54) H. A. Riyadh, E. G. Sukoharsono, and S. A. Alfaiza, “The impact of corporate social responsibility disclosure and board characteristics on corporate performance,” Cogent Bus. Manag., vol. 6, no. 1, 2019.

55) M. Al-Hajri and F. Al-Enezi, “The association between corporate social responsibility disclosure and accounting-based financial performance: A Kuwaiti evidence,” Invest. Manag. Financ. Innov., vol. 16, no. 1, pp. 1–13, 2019.

56) 2018 Du Toit, E. & Lekoloane, K., “Corporate social responsibility and financial performance: the Johannesburg Stock Exchange top 100,” Comp. Econ. Res., vol. 16, no. 3, pp. 49–62, 2018.

57) L. Najul and G. M. Santi, “corporate Social responsibility Performance and Firm Performance: A cross country Analysis from Asia,” vol. 7, no. 1, pp. 138–148, 2017.

58) M. M. Gocejna, “The Relationship Between Corporate Social Responsibility And Corporate Financial Performance – Evidence From Empirical Studies,” Comp. Econ. Res., vol. 19, no. 4, pp. 67–84, 2016.

59) B. Jitmaneeroj, “A latent variable analysis of corporate social responsibility and firm value,” Manag. Financ., vol. 44, no. 4, pp. 478–494, 2018.

VOlUME 06 ISSUE 01 JANUARY 2023

Indexed In

Avatar Avatar Avatar Avatar Avatar Avatar Avatar Avatar Avatar Avatar Avatar Avatar Avatar Avatar Avatar Avatar